California agriculture has bright future, despite drought

Scarcity of water has not dried out hopes for continued growth in California agriculture production and sales as global appetites — particularly in China — heighten demand.

Dennis Pollock | Mar 31, 2014

Most of the major California crops are facing a rosy future, thanks in large part to exports and despite drought that could cut production.

That was the consensus as major players in the tree fruit, grape, citrus, nut and dairy industries gathered in Fresno to give presentations for the Outlook 2014 Agribusiness Conference sponsored by the California Chapter of the American Society of Farm Managers and Rural Appraisers.

The scarcity of water seeped into nearly all of the talks but did not wash out hopes for continued growth in production and sales as global appetites -- particularly in China – heighten demand.

An example: Even with the drought, “we are telling the major chains there will not be a disruption in supply,” said Barry Bedwell, president of the California Grape and Tree Fruit League.

Speakers said relative prosperity for many agricultural commodities has led to spiking in some land prices and scarcity of land. In most markets, increasing profits have driven farm values to record highs, attendees were told at the close of the conference.

But properties in areas with threatened ground and surface water are at risk, speakers said, and everyone is paying closer attention to availability of water in the valuation of land. Consequences of the drought could be “dire” for some growers, and its effects could be felt in the years ahead.

While tree fruit production has declined, production of most nut crops has ballooned at the same that consumer demand has risen along with price. The market for land in some regions is driven by permanent plantings at the same time that investments could be threatened by the lack of water.

Some speakers talked of concern that food safety regulation could fall into a “one size fits all” approach that does not take into account variability among commodities. And some said further regulation of groundwater use is likely.

Here are some of the observations on the various commodities and a list of award winners:

Nut crops

It’s not yet clear how the drought will affect almonds, said Jim Zion, managing director of Meridian Nut Co. in Clovis and former chairman of American Pistachio Growers.

But he adds that there is concern that as growers turn to groundwater, salts are starting to build and that poses a problem for almonds.

“There’s good bloom this year, but what about the water situation?” he asks.

He pointed out that in 1976-77 there were 430,000 acres in the state in almonds, walnuts and pistachios. Today there are 1.3 million bearing acres.

The almond crop alone is at 2 billion pounds and much of it goes overseas.

All nut crops have benefitted from health claims that have boosted sales.

In 1987, research showed zero percent of those who purchased walnuts did so for health benefits, said Michelle McNeil, senior marketing director, international, with the California Walnut Commission and California Walnut Board.

In 2013, she said, 84 percent believe walnuts are healthy and health is the No. 1 reason for buying them.

McNeil said foreign markets are a key to sales and that India and Korea opened their doors to walnuts from the United States in the past two years. But China, opened in 2008, is the leading market for more than 200 million pounds.

She said the industry has reached only one third of domestic consumption potential.

Zion said the United States is the biggest global supplier, followed by Iran and Turkey, and added that that is unlikely to change.

Again, China is among top buyers of that nut. It’s expected the crop will reach 1 billion pounds within 10 years. He said there is some concern that deficit irrigation will “affect the crop two years out.”

One nut crop that has not seen tremendous growth is pecans. Zion said pecans are grown in multiple states, in Mexico and elsewhere, and there is “fragmentation in the industry.”

Shipments to China total nearly 100 million pounds. “China buys direct,” he said. Pecans are commonly sold at prices lower than walnuts. Producers are looking in to creating a federal marketing order.

Tree fruit and grapes

The California Grape and Tree Fruit League, which represents growers of peaches, plums and nectarines, is likely to have a new name by years end, Bedwell said.

“Something simpler such as the California Fresh Fruit Association,” he said.

As with many agricultural industries, considerable consolidation has occurred in tree fruit in recent years. The number of independent growers continues to decrease and stands at between 200 and 250 compared to 700 ten years ago. And shippers total a dozen, accounting for 80 percent of the market.

Bedwell is expecting a tree fruit crop of around 45 million boxes as bearing acreage declines to less than 80,000.

A whopping 41 percent of the crop is exported and there are new export opportunities in Australia.

The number of growers of table grapes now stands at 464. The industry has now successfully marketed two crops in a row over 100 million boxes, Bedwell said.

China is among the top markets for U.S. exports, but Bedwell pointed out it is also a producer of grapes that is seeking to import into the United States.

As for California production, Bedwell said, “The outlook in the near term remains very optimistic with a continued trend toward newer and proprietary varieties.”

Citrus

Among the biggest shifts in citrus is surging growth in easy-peeling mandarins, said David Krause, president of Paramount Citrus.

That variety, which was grown on 5,000 acres in California in 2000, is now grown on 60,000 acres, a twelvefold increase.

Paramount has adopted two brands for mandarins, Cuties and Wonderful Halos and is plowing $20 million for each of the next five years into promotion of the Halos.

“That’s serious money,” Krause said. But he added that Paramount is still investing in production of the easy peelers and has seen strong consumer demand.

Paramount is looking into other citrus varieties, including a seedless lemon and ruby Valencia.

Krause said changed maturity standards are helping ensure shoppers leave with a good taste in their mouth: “We say that we sell by the case and satisfy by the piece.”

He said the toll taken by a December freeze is yet to be known and will vary by region and variety. He said expansion in the industry has led to some planting in areas more susceptible to freezing.

His estimates: As much as 45 percent of the navel orange crop was lost. For mandarins, losses could amount to 35 to 50 percent; for lemons 20 percent to 25 percent and for Valencias 35 percent to 50 percent.

Dairy

After a number of “rough years, things are turning around this year” for dairy operators, said Michael Marsh, chief executive officer for Western United Dairymen.

Dairy operators are getting some of the best prices in years, he said, adding butter, fluid milk and cheese prices are all up, thanks to an increase in exports.

“Around the world, there is more demand than supply,” Marsh said. He said 15.6 percent of all milk produced in the United States with a value of almost $7 billion is exported.

The prices paid dairy operators is helping to compensate for a spike in feed costs due to the drought.

• Three awards were presented at the conference:

They included a Special Recognition Award given to Harry Cline, who has spent more than 40 years writing articles on California agriculture. Cline was editor of Western Farm Press for more than 30 years and was well respected for his frank commentaries on major issues impacting agriculture. He also created and directed Farm Press University, the online educational division of Farm Press-Penton. He retired Dec. 31, 2013.

The 2014 President’s Award went to brothers Mark and Ross Borba, third generation west side farmers who grow various row crops and almonds. They were early users of GPS technology and have served on various industry boards and on boards of their local school district.

The 2014 Distinguished California Agriculturalist award was presented to Paul Wenger, president of the California Farm Bureau Federation. He is a third generation farmer in Modesto who grows almonds and walnuts. He has expanded the operation to include processing of the nuts through his Wood Colony Nut Co.